CMAC AP 7 Non IFRS Information

The views expressed in this presentation are those of the presenter,

not necessarily those of the IASB or IFRS Foundation.

International Financial Reporting Standards

Agenda Paper 7

Non-IFRS information CMAC Meeting

October 2014

IFRS Foundation. 30 Cannon Street | London EC4M 6XH | UK. www.ifrs.org

2 Background

Part of the Disclosure Initiatives Principles of Disclosure (POD) research project

The POD project is meant to address comments received during the IASBs Agenda Consultation 2011

To date, the team has reviewed a variety of publications containing recommendations for the overall

improvement of financial reporting disclosures

As a result we have identified information in a complete set of IFRS financial statements as one of the POD

research topics, which includes presentation and

disclosure of non-IFRS financial information.


The main issues this project aims to address around this topic are:

(a) What types of information should be considered non-

IFRS financial information?

(b) May an entity disclose non-IFRS information in a

complete set of IFRS financial statements?

(c) If yes, where in the financial statements can non-IFRS

disclosures be made- ie can they be made in the primary

financial statements?

Background continued


3

To hear CMACs views on the inclusion or use of nonGAAP/non-IFRS financial information as part of financial statements

what we are referring to here as contradictory

information

Obtain input from CMAC for developing guidance and clarification about providing supplementary information in IFRS financial statements

Objective of this CMAC session


4

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What are the problems with presentation and disclosure of non-IFRS information?

Efforts by management to show good results could result in misleading information

Increased complexity

Regulatory guidance on non-IFRS (or non-GAAP) financial information varies globally, causing

comparability issues


We are identifying types of financial information discussed within the context of non-IFRS financial

information (not just performance measures)

We are analysing whether sufficient guidance in IFRS already exists and helping the Board determine whether

clarifications and/or additional guidance are necessary

We are not developing guidance for financial information that is not part of financial statements but

that is reported together in the same reporting package

(eg in the annual report)

What the team is doing


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We do not intend to directly define the term non-IFRS financial information. Instead we are considering

making the following distinction:

Distinguishing this type of financial information


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Required information

Supplementary information

Contradictory information

Information in financial statements

IFRS Non-IFRS

Additional information

IFRS does not specify all the disclosures needed in an entitys financial statements

Much of the information in financial statements could therefore be viewed as supplementary

Difficult to determine what is supplementary and what is contradictory

How might we distinguish what is additional information?


8

Supplementary Information Contradictory information

Recognised and measured in

accordance with IFRS

Not recognised or measured in

accordance with IFRS

Disclosed in accordance with a specified

IFRS disclosure objective/requirement

Not related to a specific disclosure

requirement

Meets objective/role of financial statements eg information about:

assets, liabilities, income, expense, equity of the entity

present/past transactions

Meets the broader objective of financial

reporting ie relevant information about:

future transactions and events ie forecasts, budgets, future purchases or

sales

Fair presentation

Neutral Clear

Misleading

Undue prominence Unclear labelling

Possible characteristics of additional information


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Forward-looking information (eg earnings forecast, backlog)

Performance measures such as EBITDA, free operating cash flows, underlying earnings

Alternative measures (eg profit or loss on non-IFRS basis)

Pro-forma information

Ratios (eg ROCE, receivables turnover ratio)

Non-financial information (sustainability reporting, information about industry regulation)

Information labelled as unusual or infrequently occurring

Immaterial information

Types of additional information often described as non-IFRS


10

CMAC members: do you agree with these examples? Do

you have any additional items that are is not in our list?

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Presentation and disclosure of supplementary information in financial statements

Some supplementary information is widely used in financial statements and may be simple to understand

(eg total assets)

Other types might demand more details or explanations (eg EBITDA or its variations)


CMAC members: do you agree with supplementary information

being presented on the face of the financial statements?

Possible examples of contradictory information: additional columns with alternative measurements to IFRS standards


12

2012 2011

In millions of dollars Note Before IFRS X IFRS X IFRS Before IFRS X IFRS X IFRS

Revenue 50,000.00 - 50,000.00 45,000.00 - 45,000.00

Cost of sales X - 20,000.00 9,000.00 - 11,000.00 - 18,000.00 8,500.00 - 9,500.00

SG&A X - 10,000.00 - - 10,000.00 - 8,000.00 - - 8,000.00

Other operating income X - 5,000.00 - 3,000.00 - 8,000.00 - 6,000.00 - 5,000.00 - 11,000.00

Profit before tax 15,000.00 - 21,000.00 13,000.00 - 16,500.00

Tax Expense X - 5,000.00 - 2,100.00 - 7,100.00 - 3,800.00 - 900.00 - 4,700.00

Profit X 10,000.00 13,900.00 9,200.00 11,800.00

Possible examples of contradictory information: additional columns excluding fair-value measurements


13

2012 2011

In millions of dollars Note Before fair value

measurements Fair value

measurements TOTAL Before fair value

measurements Fair value

measurements TOTAL

Revenue 50,000.00 -

50,000.00 45,000.00 -

45,000.00

Cost of sales X - 20,000.00 9,000.00 - 11,000.00 - 18,000.00 8,500.00 -

9,500.00

SG&A X - 10,000.00 - - 10,000.00 - 8,000.00 - -

8,000.00

Other operating income X - 5,000.00 - 3,000.00 - 8,000.00 - 6,000.00 - 5,000.00 -

11,000.00

Profit before tax 15,000.00 -

21,000.00 13,000.00 -

16,500.00

Tax Expense X - 5,000.00 - 2,100.00 - 7,100.00 - 3,800.00 - 900.00 -

4,700.00

Profit X 10,000.00

13,900.00 9,200.00

11,800.00

Possible examples of contradictory information: additional columns excluding exceptional items


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CMAC members: do you think these examples are types

of contradictory information? Can you provide other examples of information you think is contradictory?

2012

In millions of dollars Note

Before exceptional

items Exceptional items TOTAL

Revenue 50,000.00 -2,000.00 48,000.00

Cost of sales X -20,000.00 - - 20,000.00

SG&A X -10,000.00 -1,500.00 - 11,500.00

Other operating income X -5,000.00 -2,500.00 - 7,500.00

Profit before tax 15,000.00 - 9,000.00

Tax Expense X -5,000.00 - - 5,000.00

Profit X 10,000.00 4,000.00

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Presentation and disclosure of contradictory information in financial statements

Some users find contradictory information relevant

One of the discussions we will bring to the Board is about placement of contradictory information in IFRS financial statements


CMAC members: would you be comfortable with this type of

information being presented/disclosed in IFRS financial

statements if clearly labelled as such?

Thank you 16


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CMAC AP 7 Non IFRS Information